Law, Technology & Arts Blog

Obama Administration: Investigation and Prosecution of Trade Secret Theft is “Top Priority” for DOJ

Posted in Government and Regulation, Intellectual Property by LTA-Editor on April 26, 2013
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Attorney General Eric Holder

By Alexandra Krakow

At a press conference on February 20, U.S. Attorney General Eric Holder announced the Obama administration’s aim to make the investigation and prosecution of trade secret theft and economic espionage a top priority of the Department of Justice (DOJ). Taking such measures to protect against trade secret theft is a worthy priority. According to Dutch Ruppersberger, the top Democrat on the House Intelligence Committee, U.S. companies suffered estimated losses in 2012 of more than $300 billion due to theft of trade secrets, a large share due to Chinese cyber-espionage. Holder elaborated on the problem: “In some industries, a single trade secret can be worth millions—or even billions—of dollars. Trade secret theft can require companies to lay off employees, close factories, to lose sales and profits, to experience a decline in competitive position and advantage, or even to go out of business. And this type of crime can have significant impacts not only on our country’s economic well-being, but on our national security as well.”

At the press conference the DOJ unveiled a report entitled “Administration Strategy on Mitigating the Theft of U.S. Trade Secrets.” A trade secret is, broadly speaking, any business information which provides a competitive edge and which its holders have taken reasonable precautions to keep secret. The report presents five main strategy action items which the DOJ will pursue to mitigate the theft of U.S. trade secrets:  (1) focus diplomatic efforts to protect trade secrets overseas, (2) promote voluntary best practices by private industry to protect trade secrets, (3) enhance domestic law enforcement operations, (4) improve domestic legislation, and (5) increase public awareness and stakeholder outreach.

The report also highlights the importance of protecting U.S. trade secrets against theft by foreign governments, corporations, and individuals. Most trade secret theft is committed by foreign nationals, especially Chinese nationals. As Holder noted, “a hacker in China can acquire source code from a software company in Virginia without leaving his or her desk.” Notably, the DOJ press conference came two days after cybersecurity firm, Mandiant released its own report linking a multi-year, enterprise-scale computer espionage campaign to China’s military.

The National Security Division’s Counterespionage Section has taken the lead on the investigation of these crimes, since the impacts on national security can be significant.  For example, hostile states could obtain dangerous data that could expose energy, finance, and other sensitive sectors to massive losses-and leave infrastructure vulnerable.

However, successful prosecution of foreign trade secret theft remains an uphill battle.  Just two days after the Feb. 20 press conference, a federal judge in the Eastern District of Virginia found that despite eight separate attempts, the DOJ had still not properly served a South Korean company, Kolon Industries, accused of stealing trade secrets from DuPont. Because of the difficulty of prosecution, some of the most useful strategies will involve companies being more vigilant in the protection of their trade secrets.  While the Obama administration has raised its public commitment to protecting U.S. companies from trade secret theft, the best protective measures a company can take include staying informed of best practices to protect their trade secrets and exercising exhaustive vigilance in protecting valuable information.

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